exporting for small business...exporting can be one of the best ways to grow your business: •grow...

Let’s Talk Business! Exporting for Small Business

Export-Import Bank of the United States & SBA Office of International Trade

Why Washington State Companies Should Consider Exporting

Exporting for Small Business


Exporting can be one of the best ways to grow

your business:

• Grow your bottom line (Companies that export

are 17 percent more profitable than those that

don’t).

• Smooth your business cycles, including seasonal

differences.

• Add management and intercultural expertise.

• Use production capabilities fully year-round.


Exporting can be one of the best ways to grow

your business:

• Defend your domestic market.

• Increase your competitiveness in all markets.

• Increase the value of your intellectual property

should you choose to license it.

• Increase the value of your business should you

choose to sell it (and start another).


Exporting Is Strategic in Another Way:

• Ninety-five percent of the world’s consumers live

outside the United States. That’s a lot of potential

customers to ignore.

• Foreign competition is increasing domestically. To

be truly competitive, companies must consider

opening markets abroad.


Exporting Is Strategic in Another Way:

• Exporting is profitable.

• Exporting helps businesses learn how to

compete more successfully.

• Companies that export are 8.5% less likely to go

out of business

• Jobs related to exports pay 15% more

Washington State Trade Overview –Products, Industries, and Markets Driving

Small Business Exports


Washington Goods Exports in 2016

$79.6 billion

Texas 232,587,855,125California 163,616,487,458Washington 79,563,695,758New York 74,406,138,530Illinois 59,808,237,525

Washington State in Top Five for Total Exports

Washington State Export Market

Washington Goods Exported

Washington State SME Exporters

Washington State Export Jobs

Washington Export Resources – Local, State, Regional, Federal Agencies Who

Support International Trade


Washington Export Outreach Team

Washington Export Outreach Team (WEOT) is a group of Local, State, Regional, and Federal Agencies who work cooperatively together across Washington State to support Washington Exporters.

• U.S. Small Business Administration (SBA)

• U.S. Small Business Administration – Office of International Trade (SBA OIT)

• Export-Import Bank of the United States (EXIM Bank)

• U.S. Commercial Service / U.S. Department of Commerce

• USDA Rural Development - Washington

• Tacoma MBDA Business Center


• Washington State Department of Commerce

• Washington State Department of Agriculture

• Washington SBDC Export Readiness Center

• Washington SCORE Chapters

• Export Finance Assistance Center of Washington (EFACW)

• Impact Washington – (MEP Partner)


• Export 101 Class (Full Day)

• Export 101 Lite Class (Half Day)

• Export Resources Forum (Quarter Day)

WEOT Export 101 Seminars are unique as it walks companies through the exporting process and introduces them to resources to help them.

The companies also have the opportunity for one-on-one networking with all of the Local, State, Regional and Federal resources at the end of the events.

WEOT Education & Outreach

• Washington SCORE Chapters

• Washington SBDC Network (Export Center)

• Export Finance Assistance Center of Washington (EFACW)

• Tacoma MBDA Business Center

WEOT Business Counseling Resources

• U.S. Commercial Service / U.S. Department of Commerce (Seattle, Spokane, Portland)

• Washington State Department of Commerce

• Washington State Department of Agriculture

• Western U.S. Agricultural Trade Association

WEOT Export Development Resources

• U.S. Department of Agriculture – Rural Development – Washington State

• U.S. Small Business Administration – Office of International Trade (SBA OIT) – Seattle & Portland

• Export-Import Bank of the United States (EXIM Bank)

WEOT Export Finance Resources

Understanding Sales Channels in International Trade


Approaches to Exporting

The way or ways you choose to export your products and services can have a significant effect on your export plan and specific marketing strategies. The various approaches to exporting relate to your company’s level of involvement in the export process. Four general approaches may be used alone or in combination:

1. Passively filling orders from domestic buyers, who then export the product.

2. Seeking out domestic buyers who represent foreign end-users or customers

3. Exporting indirectly through intermediaries.

4. Exporting directly.

Distribution Considerations

Here are some questions to consider when distributing your products and services:

• Which channels of distribution should your company use to market its products abroad?

• Where should your company produce its products, and how should it distribute them in the foreign market?

• Are there warehouse facilities available in the foreign market to shorten supply lines, save money on freight, and get the products to Buyers faster?

Distribution Considerations

Here are some questions to consider when distributing your products and services:

• What types of representatives, brokers, wholesalers, dealers, distributors, or end-user customers should you use?

• What are the characteristics and capabilities of the available intermediaries?

• Should you obtain the assistance of an EMC or an ETC?

Indirect ExportingThe principal advantage of Indirect Exporting for a smaller U.S. company is that an indirect approach provides a way to enter foreign markets without the potential complexities and risks of Direct Exporting.

Several kinds of intermediary companies provide a range of export services, and each type of company can offer distinct advantages to your company.

• Confirming Houses or Buying Agents: represent foreign companies that want to purchase your products.

• Export Management Companies: act as the export department for producers of goods and services. It solicits and transacts business in the names of the producers it represents or in its own name for a commission, salary, or retainer plus commission.

Indirect Exporting

• Export Trading Companies: facilitate the export of U.S. goods and services. Like an EMC, an ETC can either act as the export department for producers or take title to the product.

• Export Agents, Merchants, or Remarketers: purchase products directly from the manufacturer, packing and labeling the products according to their own specifications. They then sell these products overseas through their contacts in their own names and assume all risks.

• Piggyback Marketing: is an arrangement in which one manufacturer or service company distributes a second company’s product or service.

Direct Exporting

The advantages of Direct Exporting for your company include more control over the export process, potentially higher profits, and a closer relationship to the overseas buyer and marketplace, as well as the opportunity to learn what you can do to boost overall competitiveness. However, those advantages come at a price; your company needs to devote more time, personnel, and resources to direct exporting than it would to indirect exporting.

Once your company is organized to handle exporting, a proper channel of distribution needs to be carefully chosen for each market. These channels include: Sales Representatives, Agents, Distributors, Retailers, and End-Users.

Direct Exporting

Sales Representatives: An Overseas Sales Representative is the equivalent of a Manufacturer’s Representative in the United States. The Representative uses your company’s product literature and samples to present the product to potential buyers.

Agents or Representatives: The widely misunderstood term Agent means a Representative who normally has authority— perhaps even a Power of Attorney—to make commitments on behalf of the company that he or she represents. Companies in the United States and other developed countries have stopped using that term because agent can imply a Power of Attorney. Instead, they use the term Representative.

Direct Exporting

Distributors: The Foreign Distributor is a merchant who purchases goods from a U.S. Exporter (often at a discount) and resells them for a profit. The Foreign Distributor generally provides support and service for the product, relieving the U.S. Exporter of those responsibilities. The Distributor usually carries an inventory of products and a sufficient supply of spare parts and also maintains adequate facilities and personnel for normal servicing operations.

What is the most common and consistent channel for producing the desired result among smaller U.S. Exporters?

The answer is Distributors.

Direct Exporting

Foreign Retailers: You may also sell directly to Foreign Retailers, although in such transactions products are generally limited to consumer lines. The approach relies mainly on traveling Sales Representatives who directly contact Foreign Retailers, although results might also be achieved by mailing catalogs, brochures, or other literature.

Direct Sales to End-Users: You may sell your products or services directly to End-users in foreign countries. The buyers may be Foreign Government Institutions, Businesses, or Final Consumers via online sales. The buyers can be identified at trade shows, through international publications, by the overseas posts of the U.S. Commercial Service, or may find you via search engine results.

International Payment Methods


Payment Method Considerations

Cash in AdvanceLetter of

CreditDocumentary

CollectionOpen

Account

Low Risk Seller Risk High Risk

High Risk Buyer Risk Low Risk

Importer (Foreign Buyer) wants to delay paymentas long as possible

U.S. Exporter (Seller) wants to receive payment as soon as possible

International Payment Methods

Definition

Importer (Foreign Buyer) makes payment before goods are shipped or services provided by the U.S. Exporter (Seller)

How it Works

Payments are made via Wire Transfer, Automated Clearing House (ACH), Foreign Check, Foreign Draft, Credit Card, PayPal, Apple Pay

Banks do not handle documents but may facilitate payment

Cash-In-Advance

Definition

A Letter of Credit (L/C) also referred to as a Documentary Credit, is a contractual agreement whereby a bank in the Foreign Buyer’s country, known as the Issuing Bank, acting on behalf of its customer (the Applicant or Foreign Buyer or Importer), authorizes a bank in the Seller’s country, known as the Advising Bank, to make payment to the Beneficiary (the Seller or U.S. Exporter) against the receipt of stipulated documents.

An L/C is a separate contract from the sales contract on which it is based and, therefore, the bank is not concerned whether each party fulfills the terms of the sales contract.

The bank’s obligation to pay is solely conditional upon the Seller’s compliance with the terms and conditions of the L/C. In L/C transactions, banks deal in documents only, not in the underlying goods and services.

Letters of Credit

How it Works

1. The Importer (Foreign Buyer) arranges for the Issuing Bank to open an LC in favor of the U.S. Exporter.

2. The Issuing Bank transmits the LC to the Nominated Bank, which forwards it to the U.S. Exporter.

3. The U.S. Exporter forwards the goods and documents to a Freight Forwarder.

4. The Freight Forwarder dispatches the goods and submits documents to the Nominated Bank.

5. The Nominated Bank checks documents for compliance with the LC and collects payment from the Issuing Bank for the U.S. Exporter.

6. The Importer’s (Foreign Buyer) account at the Issuing Bank is debited.

7. The Issuing Bank releases documents to the Importer (Foreign Buyer) to claim the goods from the carrier and to clear them at customs.

Letters of Credit

Documentary Collections: What

Definition

U.S. Exporter (Seller) entrusts collection of payment to its bank, which sends documents to the Foreign Buyer’s Bank, along with instructions for payment

How it works

Seller’s Bank acts as agent to present documents to Buyer’s Bank in exchange for payment or acceptance.

Liability for either bank is limited to releasing/ accepting documents against payment / acceptance as per instructions

Documentary Collections

Documentary Collections: WhatHow it works

1. The U.S. Exporter ships the goods to the Importer (Foreign Buyer and receives the documents in exchange.

2. The U.S. Exporter presents the documents with instructions for obtaining payment to his bank.

3. The U.S. Exporter’s - Remitting Bank sends the documents to the Importer’s (Foreign Buyer) - Collecting Bank.

4. The Collecting Bank releases the documents to the Importer (Foreign Buyer) on receipt of payment or acceptance of the draft.

5. The Importer (Foreign Buyer) uses the documents to obtain the goods and to clear them at customs.

6. Once the Collecting Bank receives payment, it forwards the proceeds to the Remitting Bank.

7. The Remitting Bank then credits the U.S. Exporter’s account.

Documentary Collections

Definition

An open account transaction means that the goods are shipped and delivered or services provided before payment is due, usually in 30 to 90 days

The goods and services, along with all the necessary documents, are shipped directly to the Importer who agrees to pay the U.S. Exporter’s (Seller) invoice at a future date

How it Works

Payments are made via Wire Transfer, Automated Clearing House (ACH), Foreign Check, Foreign Draft, Credit Card, PayPal, Apple Pay

Banks do not handle documents but may facilitate payment

Open Account

In advance

U.S. Exporter (Seller) needs payment to finance the production of the goods and/or provision of services the Foreign Buyer (Importer) has ordered

At time of shipment of goods and/or provision of services

U.S. Exporter (Seller) wants assurance of payment as soon as the goods are shipped or services are provided

After shipment of goods and/or provision of services

U.S. Exporter (Seller) is prepared to wait for payment for a certain time period after shipment or after services are provided. U.S. Exporter (Seller) trusts the Foreign Buyer (Importer)

Payment Considerations: U.S. Exporter

In advance

Foreign Buyer (Importer) trusts the Seller (U.S. Exporter) knowing that the contract will be carried out as agreed and is therefore willing to pay in advance

At time of shipment of goods and/or provision of services

Foreign Buyer (Importer) does not want to take the risk of payment before being certain that the goods are shipped on time or services are provided and that they are as stipulated in the contract with the Seller (U.S. Exporter)

After shipment of goods and/or provision of services

Foreign Buyer (Importer) possibly wants to sell the goods or

be satisfied that the services have been provided before

Paying the Seller (U.S. Exporter)

Payment Considerations: Foreign Buyer

Open Account Considerations

Selling on credit is a requirement in today’s economy

Most companies can’t compete domestically or globally unless they can offer credit terms

EXIM Bank Export Credit Insurance


Export Credit Insurance

Insurance against non-payment of

foreign accounts receivable

NOT a means to make bad

credit good

NOTprimary

source of repayment

Benefit: Risk Mitigation Tool

Export Credit Insurance allows U.S. Exporters to safely offer extended credit terms to their Foreign Buyers

EXIM Bank provides 95% coverage against Commercial & Political Risks on Foreign Accounts Receivables for Small Businesses

Benefit: Sales & Marketing Tool

Export Credit Insurance can help to provide: Increased sales to existing

customers in existing markets

New sales to new customers

in existing markets

New sales to new customers

in new markets

that might not ordinarily happen without the use of export credit insurance product support.

Benefit: Financing Tool

Leverage Export Credit Insurance for your financing needs

Exporter can assign payment of the policy proceeds on their insured Foreign Receivables to their Lender

Lender can then add the Exporter’s Foreign Receivables into their Borrowing Base

Banks can lend more capital to Exporter against insured Foreign Receivables on better financing terms

Benefit: Credit Management Tool

Exporter submits Foreign Buyer Name to EXIM Bank

◊ If EXIM Bank approves the Foreign Buyer, then the Exporter can offer open account (extended) payment terms secured by export credit insurance

Open Account terms

◊ If EXIM Bank does not approve the Foreign Buyer, then the Exporter can offer secure payment terms

Cash-in-Advance

Letter of Credit

EXIM Bank can help U.S. Exporters to make the decision to extend credit to their Foreign Buyers

Types of Policies & Target Clients

Express Insurance

• New to EXIM Bank Small Business Exporters with < $7,500,000 export credit sales & 10 or less Buyers

Small Business Multi-Buyer

• Small Business Exporters with < $7,500,000 export credit sales & more that 10 Buyers

Standard Multi-Buyer

• Experienced Exporters more than one Buyer

Single Buyer

• Any Exporter desiring to insure only one Buyer

Registered Broker Support

Policy Application

Policy Quote

Submit Foreign Buyers Names

Shipment Reporting

Premium Payment

Claims Filing

Military Restrictions & U.S. Content

No Defense Articles or Services, or Military Buyers

Exceptions possible for humanitarian purposes, drug interdiction, dual-use items

U.S. Content

Short-term: Each item must have more than 50% U.S. content

Services must be performed by U.S.-based personnel, either in the US or in the “host” country

Country Eligibility

Country Coverage Support available in over 180 countries

Restrictions may apply for either Political or Economic reasons

Refer to the Country Limitation Schedule (CLS) at http://www.exim.gov/tools-for-exporters/country-limitation-schedule

http://www.exim.gov/tools-for-exporters/country-limitation-schedule

SBA Export Loan Programs


• Maximum of $5 million for Export Related Loans

• No U.S. Content requirement, but must ship

from U.S.

• Military Exports can be financed if properly

licensed

• In business for 12 months or proven expertise

• 90% Guarantee for most Export Related Loans

SBA Export Guarantee Guidelines

• Export Working Capital Program (EWCP)

– Up to $5 Million; short-term (12 month) line of credit

• International Trade Loan (ITL)

– Up to $5 Million; long-term loan (5 –to- 10 years)

• Export Express

– Up to $500,000; term loan or line of credit

SBA Export Loan Programs

• Transaction Based EWCP Used to Finance:

─ Single export order or Multiple export orders

─ No funds disbursed until the P.O. has been signed

─ But financing can be approved for a pending order

─ Payment from the foreign buyer is applied directly to the loan thru a cash collateral control account

Transaction Based EWCP –Self Liquidating Line of Credit

• To Acquire or Produce Goods & Services for Export

─ Funds Used to Finance up to 100% of Direct Costs

─ Not to Exceed 90% of Export PO, Contracts or L/C’s

Transaction Based EWCP –Use of Proceeds

• 90% Guarantees on Loans of up to $5 million

• Term Loans for Equipment, Facilities, Refinancing, and Permanent Working Capital

• To Enhance the Exporter’s Competitive

Position

• Business plan must include eligibility & projected exports, otherwise same as 7(a) processing

International Trade Loan –Positioning for Long Term Success

• Combines ITL & EWCP with Streamlined Approvals

• 90% up to $350,000/ 75% on $350,000 to $500,000

• Term or Revolving Loans for Any Export Activity – Working Capital, Fixed Assets, Marketing Costs . . .

• Approved SBA Express Lenders are Authorized to Process Export Express Independently

SBA Export Express for Smaller Export-Related Loans

SBA OIT in Washington

Lee Gibbs Regional Export Finance Manager

US Small Business AdministrationOffice of International Trade (SBA OIT) US Export Assistance Center - Seattle2001 6th Avenue, Suite 2610,Seattle, WA 98121Tel: (206) 553-0051 Ext 228 Cell: (206) 470-9243 Email: [email protected]://www.sba.gov/managing-business/exporting

Serving : Washington, North Idaho and Alaska

mailto:[email protected]

https://www.sba.gov/managing-business/exporting

EXIM Bank in Washington

John Brislin Director - Seattle Regional Office

Export-Import Bank of the United States (EXIM Bank)2001 6th Avenue, Suite 2600 Westin Building Exchange Seattle, WA 98121 Tel: (206)-728-2264 Cell: (206)-307-5289 Email: [email protected]://www.exim.gov/

Serving: Washington, Idaho, and Alaska

mailto:[email protected]

http://www.exim.gov/

Secret to Export Success

Exporting Takes Teamwork to Succeed

Teamwork is the Fuel that allows Common People to attain Uncommon Results

exporting for small business...exporting can be one of the best ways to grow your business: •grow...

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